In order to secure stable income from the operating assets in the medium to long term and achieve steady growth, MHR shall decide to issue new units, investment corporation bonds or short-term investment corporation bonds or enter into new borrowings based on what is deemed the most appropriate based on factors such as financial flexibility, financing stability and enhancement of income. Financing may be used towards the acquisition of real estate related assets, maintenance and repair expenses, working capital and distributions of the Investment Corporation and the repayment of debt (including the repayment of tenant leasehold and security deposits for real estate related assets, borrowings, investment corporation bonds and short-term investment corporation bonds). However, the purpose and use of funds raised through short-term investment corporation bonds shall be limited to the extent required by applicable laws and regulations.
Equity Finance (Issuance of New Investment Units)
Issuances of new investment units shall be conducted from a medium- to long-term perspective with the goal of pursuing steady growth of the operating assets, based on an accurate understanding of the financial environment and taking into consideration investment unit dilution (the dilution caused by the issuance of new investment units on voting rights and per unit net asset value or distributions).
Borrowings, Investment Corporation Bonds and Short-term Investment Corporation Bonds
- The maximum principal amount of any borrowing, investment corporation bond or short-term investment corporation bond shall be 1 trillion yen, and the aggregate amount of the foregoing shall be limited to 1 trillion yen.
- When incurring borrowings, lenders shall be limited to qualified institutional investors as defined in Article 2(3) Item 1 of the Financial Instruments and Exchange Act (Act No. 25 of 1948, as amended, or the “FIEA”) (and further limited to the institutional investors defined in Article 67-15 of the Special Taxation Measures Act (Act No. 26 of 1957), as amended).
- When incurring borrowings or issuing investment corporation bonds or short-term investment corporation bonds, MHR shall comprehensively take into account factors such as trends in the capital markets and interest rates, the Investment Corporation’s capital structure and impact on existing unitholders, bear in mind potential future changes in the economy and society, and consider borrowing terms such as fixed or floating rate, collateral requirements and fees.
- For the purpose of retaining flexibility with respect to acquisitions of real estate related assets, the repayment of tenant leasehold and security deposits and working capital needs, the Investment Corporation may enter into specified commitment line agreements, other commitment line agreements and similar advance agreements that involve a credit line or ability to borrow funds from time to time.
- Operating assets may be pledged as collateral in connection with the incurring of borrowings or the issuance of investment corporation bonds or short-term investment corporation bonds.
- The ratio of borrowings, investment corporation bonds and short-term investment corporation bonds to the Investment Corporation’s total assets shall be limited to a target of 65%. However, it shall be possible to temporarily exceed this limit due to factors such as the acquisition of real estate related assets and changes in appraisal values.
MHR may decide to have the Investment Corporation engage in derivative transactions with respect to the operating assets for the purpose of hedging against interest rate and other risks related to borrowings or other fund raising.
- The Investment Corporation shall hold what is considered an appropriate amount of cash deposits in order to cover expected funding needs (such as cash required for acquiring real estate related assets, maintenance and repairs expenses for real estate operating assets, working capital, repayment of tenant leasehold and security deposits, repayment of ordinary course liabilities and making of distributions).
- Surplus funds shall be managed carefully taking into consideration factors such as safety and liquidity, as well as market conditions and funding conditions.
- It shall be possible to utilize tenant leasehold and security deposits as working capital.